Question 20Q - Intermediate Accounting (Kieso)

Question

Santo Corporation has eight expense accounts in its general ledger, classified as selling expenses. Should Santo report these eight expenses separately in its income statement or report one total amount for selling expenses?

Step-by-Step Solution

Answer

Santo Corporation may report these expenses by choosing one of the two methods available.

Meaning of Selling Expenses

Selling general and administrative expenses include all expenses directly incurred for sales and administrative fees.

Explanation for reporting selling expenses

Both the formats are acceptable but presenting a single expense amount may be preferably supported by a schedule of eight components in the notes to financial statements if the condensed version is adopted. By disclosing all the results of the activities, a reader can understand and discover the facts of importance.